Disinvestment irrespective
of whatever its reasons been is feared to send wrong signals to the foreign investors

By Syed M. AslamOct 16 - 22, 2000

ABN AMRO Asia Limited Hong Kong has sold its entire 76 per cent equity
stake in First Capital ABN AMRO Equities (Pakistan) Limited (FCAAE), a corporate brokerage
firm. The buyer is First Capital Securities Corporation Limited (FCSC), a stock market
listed company, which not only owns the remaining equity but also manages the brokerage
operations for FCAAE in the country.

The FCSC has called an extraordinary general meeting at its registered
office in Lahore on the 27th of this month. Besides transacting ordinary business of
confirming the minutes of the previous extraordinary general meeting, the meeting will
also transact special business which includes passing of resolution to authorise the chief
executive of the company to negotiate, finalise and execute the purchase of the 76 per
cent equity stake and to change the name of FCAAE to 'First Capital Equities Limited
(FCEL).' The resolutions and their implementation has to get the approval of the
Securities and Exchange Commission of Pakistan.

FCAAE was incorporated in Pakistan on January 26, 1995 and its main
activity includes share brokerage and conducting business research and its publication. In
1998, FCAAE was rated as the number one brokerage house in Pakistan by 'Asia Money'
magazine for its order execution capability and number two in Specialist Research
categories. In addition, a poll of American and Asian Fund Managers' conducted by Reuters
also placed FCAAE as the number one brokerage house in Pakistan.

The FCAAE has decided to sell its entire 7.602 million shares for Rs
one million or a throw away price of just Rs 0.1315 per share. This is indeed an extremely
bargain deal for the FCSC as the membership card of the Karachi Stock Exchange alone
carries a price tag of over Rs 35 million. While FCSC has said that it has been approached
by the ABN AMRO Hong Kong to sell its entire shareholding in FCAAE 'due to its change in
regional business strategy' the offloading at surprisingly nominal price, the haste and
the manner betrays its claim. While FCAAE's loss is an immense gain for FCSC at
hard-to-refuse bargain price.

Observers attribute the surprising sell-off on the finding of the Etrat
Rizvi inquiry committee investigating the stock market fiasco in the country this May. The
committee had named FCAAE as one of the four brokerages allegedly acting as 'front
runners' for the suspended stock broker billionaire Mian Iftikhar Shafi at Lahore. FCAAE
was also one of nine brokerages in Karachi whose records were checked by the inspectors of
Securities and Exchange Commission of Pakistan early last month apparently to find a clue
of its involvement in the stock crisis of May.

The decision to disinvest its entire investment in FCAAE by its parent
company in Hong Kong, ABN AMRO Asia Limited, in what looks like extreme haste and at
exceptionally nominal price is seen by the observers in the backdrop of the May stock
crisis and the investigations that followed. It is viewed as a way-out to minimise the
damage that it has done to tarnish the image of a company otherwise held in high esteem
internationally. But the disinvestment irrespective of whatever its reasons been is feared
to send wrong signals to the foreign investors for the ultimate loss of the country.

Talking to PAGE, Director of AKD SECURITIES, Faisal Bengali
attributed the sell-off on the investigation of the May stock prices which implicated
FCAAE. He expressed fears that irrespective of the reasons the disinvestment would send
wrong signals tarnishing the image and huge loss of trust for the potential foreign
investors. A number of foreign brokerage offices have already closed their operations in
the country and the rest of remaining two to three are feared to get influenced to take
the leap due to the dwindling image and the increasing loss of trust, he added. This is
all the more worrying as foreign brokerages are not coming into the country while many of
the existing ones have and are in the process of wrapping up their operations in the
country, he added.

He stressed that while it is the ABN AMRO securities which has lost
money, because despite holding 76 per cent of the equity the brokerage operations were
carried out by the FCSC, the disinvestment would have a direct impact on the national
economy resulting from loss of trust and negative image which it reflects. The
disinvestment should be seen in the greater perspective than that of a foreign investor
losing money the spillover of which would now be borne by the local economy.

The chairman and chief executive of
FCSC, Salmaan Taseer, has been appointed the first
chief executive of First Capital Equities Limited, the changed name of
FCAAE, for a period
of three years with effect from the date of transfer of the 76 per cent remaining shares.
He has agreed that the FCSC has got FCAAE cheap but 'nevertheless at a negotiated price.'
That 'negotiated price', however, has turned many heads posing all sorts of questions
whose answers will only be provided by the passage of time.